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Oil Prices Drop as Middle East Concerns Subside

by Krystal

Oil markets have shifted to a bearish outlook following U.S. Secretary of State Antony Blinken’s announcement that Israeli Prime Minister Benjamin Netanyahu has agreed to a cease-fire proposal to end the Gaza conflict. The only remaining step is for Hamas to accept the proposal. Blinken met with Israeli leaders in Jerusalem on Monday.

After reaching four-week highs, the options market’s risk assessment—measuring the cost of insuring against price fluctuations—has turned bearish, reflecting a reduced concern about a new escalation in the Middle East. Consequently, crude oil futures have fallen sharply, marking their biggest decline in two weeks. Brent crude for October delivery was priced at $78.21 per barrel at 10:20 AM ET on Tuesday, down from $81.20 a week ago. Meanwhile, WTI crude for September delivery was trading at $75.00 per barrel, down from $78.85 a week earlier.

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John Kilduff of Again Capital attributes the weak oil market to ongoing weak economic data from China. Conversely, analysts at ANZ highlight that concerns over weak demand in China are outweighing any potential gains from supply risks. Government data revealed an 8% year-over-year drop in China’s crude demand in July, and recent economic figures show continued sluggish industrial activity in the country.

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In addition, increased oil supply is putting further pressure on prices. Bloomberg reports that production at Libya’s Waha oil field has returned to normal levels of approximately 300,000 barrels per day following earlier-than-expected pipeline maintenance. Additionally, output at the Sharara field has improved to around 85,000 barrels per day, according to Reuters. These improvements come just two weeks after Libya’s National Oil Corporation declared force majeure on oil exports due to a blockade by protesters.

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